LegiStorm

Summary:

Since the Supreme Court's ruling on the Defense of Marriage Act (DOMA) in 2013—in the case of United States v. Windsor—married same-sex couples have been considered married for federal tax purposes. The federal tax treatment of married same-sex couples was not affected by the recent June 26, 2015, ruling in Obergefell v. Hodges. Obergefell struck down state bans on same-sex marriage. As a result of the Court's decision, all states must both permit same-sex couples to marry in their states and recognize same-sex marriages that were formed in other states. The U.S. Supreme Court ruled in Windsor that Section 3 of the Defense of Marriage Act (DOMA; P.L. 104-199) was unconstitutional. Section 3 of DOMA required that, for purposes of federal enactments, marriage be defined as the legal union of one man and one woman and the word spouse be defined as someone of the opposite sex who is a husband or wife. Hence, before the Windsor decision, same-sex marriages were not recognized by the federal government for the receipt of federal benefits or for federal tax purposes. On August 29, 2013, the Department of the Treasury and the Internal Revenue Service (IRS) ruled that legally married same-sex couples would be treated as married for federal tax purposes even when the couple resided in a state or jurisdiction that did not recognize same-sex marriage. (As a result of Obergefell, states and other jurisdictions must now allow and recognize same-sex marriages.) After September 15, 2013, legally married same-sex couples must file their federal income tax returns using either the "married filing jointly" or "married filing separately" filing status. Federal recognition of same-sex marriages affects federal tax revenues primarily through changes in the federal income tax. For the limited number of married same-sex individuals who have sufficient assets to be subject to the estate tax, potential estate tax liability may also be affected. While it did not change the administration of federal income tax laws, the Obergefell decision may affect the number of same-sex couples who decide to marry (and hence the number of couples who file their federal and state tax returns as married), ultimately affecting federal revenues. A discussion of changes to individuals' state tax liabilities resulting from the Obergefell decision is beyond the scope of this report; however, state tax changes may ultimately affect federal tax liabilities for those couples who itemize deductions on their federal returns. In filing their tax returns as a married couple, some same-sex spouses may face a "marriage penalty," having a higher income tax liability when filing taxes as a married couple than their combined tax liability when filing as two single taxpayers. Other couples may benefit from a "marriage bonus," whereby they have a lower tax liability when filing as a couple than their combined tax liability when filing as single individuals. Treating same-sex couples as married for federal tax purposes may have substantial financial implications for some affected couples. The budgetary impact from the perspective of the federal government, however, is likely small. Married same-sex couples who stand to benefit from filing taxes as a married couple may choose to file amended tax returns to change their filing status to married filing jointly for prior open tax years in which they were married. Generally, the statute of limitations allows taxpayers to file a refund claim for three years from the date the return was due (or two years from the date the tax was paid).